Mold becomes growing problem

Erin Johansen (Denver Business Journal)

Nationwide, insurance claims for mold have increased more than 80-fold over the past three years. The construction, insurance, development and medical professions are scrambling to address what has turned into a very expensive problem.

Even in the middle of a drought, Colorado isn’t immune. A database compiled by a group called Policyholders of America found that 98 Coloradans retained counsel for first-party mold-related insurance claims between the late ’90s and February of 2002. Most of these claims were made by homeowners.

“I think there’s a general sense that Colorado is too dry to have mold,” said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

Walker said the majority of mold claims in Colorado result from water damage, but mold is also caused by construction defects and maintenance issues.

In fact, the remedy to Colorado’s expansive soils problem has been a source of mold problems for some homebuilders.

“A significant portion of the mold-related claims are really secondary consequences of the building community’s reaction to the expansive soils claims,” said Dennis Polk, an attorney with Holley, Albertson & Polk P.C., who has represented builders in construction defect claims, including those for mold.

Expansive soils have caused homes to shift and led to structural damage and subsequent lawsuits against builders.
“Colorado, almost uniquely in the U.S., has addressed [the expansive soils problem] with a structural wood subfloor system,” Polk said.

This subfloor is meant to allow for shifting without causing structural damage to a home. Unfortunately, the crawl space below these subfloors wasn’t always ventilated properly, so mold grew there and resulted in claims.

“Who knows how long there’s been mold in crawl spaces? Probably always,” said Kim Calomino, director of technical affairs for the Home Builders Association of Metro Denver. The Denver HBA is working with its members to address mold-related issues and is part of a task force that’s crafting potential building codes that address moisture management.

“Why is it more prominent now? Increased media coverage and more awareness in the general public,” Calomino said. “Whether it’s actually more prominent, I don’t think anyone has an answer.”

Nationally, claims alleging illness caused by mold exposure are becoming more common. These claims range from memory loss to respiratory problems. But the medical community has yet to establish a causal link between exposure to mold and illness.

Bob Woellner, president of Quest Inc., does air-quality testing and helps companies with risk management of environmental hazards. The company works mostly in the commercial real estate arena, and Woellner has served as an expert witness for several mold-related cases.

“I watch and participate in the medical side of things,” he said. “There isn’t a lot of data saying there’s a lot of direct medical risks. By working with the medical side of things, we can look at the perceived and the true risks.”

One strain of mold, known as stachybotrys, has been called “toxic mold” and is the strain behind many bodily injury claims. However, the Centers for Disease Control and Prevention recommends the removal of any type of mold from living areas, because mold allergies are common.

On its Web site, the CDC states that no causal link between stachybotrys mold and alleged health risks such as memory loss or pulmonary hemorrhage has been proven.

Overall, the question of mold is complicated by the fact that there are very few official standards regarding how much mold is dangerous, how mold should be cleaned up or what qualifies as “clean” when mold is removed. One of the few “official” sources is a guide to mold remediation in schools and commercial buildings put out by the Environmental Protection Agency.

U.S. Rep. John Conyers, D-Michigan, introduced a bill this spring known as the “Toxic Mold Safety and Protection Act.”
Among other things, the act would require that more research be done on the health effects of mold and that standards be set for indoor air quality regarding mold.

Calomino is concerned that homeowners are increasingly moving directly to litigation rather than allowing home builders an opportunity to remedy the problem.

“There are homeowners that think they need to sue. It’s a sign of the times. Litigation seems like first and best course of action. The builder, like any other corporate citizen, wants to provide a good product and wants to make the consumer happy,” Calomino said. “It’s disappointing when we get the attorney’s phone call rather than the homeowner’s.”

“Our approach continues to be and it will always be that if you have a mold problem, you should take care of it,” said Bruce Wilson, director of environmental health at Tri-County Health Department, which represents Adams, Arapahoe and Douglas counties. “We would prefer any day that it get resolved on a cooperative basis, rather than getting into litigation. The bottom line is, we need to take care of people’s health.”

Tri-County is part of the task force looking at how building codes might be changed to better address moisture and subsequent mold problems.

The group Policyholders of America was founded in 2002 by Melinda Ballard, who was awarded $32.2 million in damages for a bad faith claim against her insurance company after it failed to cure water damage that later resulted in mold growth in her family’s 11,500-square-foot Texas home. This is the highest mold-related award to date.

Texas, California and Florida have been hit hardest by mold-related claims with 53 percent of the more than 16,000 claims being tracked by the group reported in those three states. In fact, some insurance companies are said to be pulling out of Texas, because the high number of mold claims have made it cost prohibitive to do business there.

“The difference is, in Texas, a number of large insurers are being forced from the market because of mold,” said Walker. “At some point, the company can’t price the coverage high enough.”

Many insurance companies are now grappling with how to address mold claims and many — especially homeowner’s policies — are excluding mold from their coverage entirely.

“We’re helping to create language that helps there be coverage. Insurance companies tend to want to get out of it completely, but some are letting you buy back coverage — but not to the policy limits,” said David Sloan, a vice president in Marsh Inc.’s environmental practice group in Denver. Marsh is a large commercial insurance broker that also provides risk management services.

Sloan said homebuilders and smaller contractors, like plumbers, are finding it increasingly expensive to get mold coverage, if they can at all.

“That’s the heartbreaking part of this. You can sue anyone — subs, drywallers — they can all be named,” Walker said. “I guess we could sue each other to death, or we could try to find out if it’s a real health concern.”